09/02/10

By Celeste Boruvka

Prepaid cards started life in the US ten years ago as an alternative means to having a bank account and to manage money effectively. Rapidly growing in popularity, they spread to the UK.

Expanding on the initial prepaid card concept, Caxton FX spotted a gap in the market for the need of a fast, secure and cost effective means of travel expenses. Developing the first euro prepaid currency card, in 2007, acted as a catalyst for many other companies to create pre-loadable cards of their own.

After the success of the euro card, the dollar card was launched. This was followed in March 2009 by the international sterling card, the Global Traveller.

Originally developed for the consumer market, the B2B market soon saw the potential of prepaid currency cards. Accounts teams wanting to source a way to reduce overheads and unnecessary costs, while also keeping tighter control on expenditure and the need for simplifying the expenses procedure, has helped drive up popularity of the prepaid currency card. Additionally, the personal experience of decision makers using prepaid currency cards on their own holidays strengthened the compelling case for moving to this new method.

What is a pre-paid Currency Card?

A prepaid currency card operates in a similar fashion to a mobile phone top-up card. Customers choose to load their desired amount by transferring sterling to their card supplier. The selected currency is then loaded to their card. Customers can spend as they would with a normal credit or debit card, purchasing items and services and withdrawing cash from ATM machines whilst abroad. Cards are reloadable and have a similar life span, in the instance of Caxton FX, two years.

For business customers, prepaid cards, offer numerous benefits. In unstable economic times, most businesses are focussing on reducing spend from their bottom line. Prepaid currency cards offer an obvious way to drive down costs and can be seamlessly integrated into a business’ account structure.

Driving down costs of business travel

Many business travel solutions come with membership fees and other layers of charges. Most currency providers base rates on large margins, meaning businesses are stung by uncompetitive exchange rates on top of fees. Caxton FX removed these unnecessary costs, making their prepaid currency cards free to set up, with no administration or load charges. There are also no charges for using the cards overseas to spend and no overseas ATM withdrawal fees. If a business operates a per diem expenses policy, set amounts can be loaded, meaning it is impossible to over spend. With no top-up or inactivity fees either, Caxton FX prepaid cards provide a cost effective way to finance business travel.

Minimising administration

Another issue for expense administrators is often the painful accounting and reconciliation process. Online based systems are becoming more and more popular in a bid to simplify this task and become ‘paperless’. Caxton FX offers an online platform that seamlessly integrates with existing systems held in businesses. As accounts are opened online and card statements can easily be exported for reconciliation the ability to ‘go green’ has never been easier.

Though the nominated company administrator oversees all card accounts, individuals are able to check their balances online, meaning budgetary control is simplified.

Instant loading enables any emergency funds to be provided to an employee. As Caxton FX cards can be loaded online, by SMS or over the phone, any unexpected expenditure can be dealt with immediately.

Safety and security is paramount

Benefits of using a prepaid currency card/e-payment system for business travel are in abundance. Security of funds is one of them. By using prepaid currency cards, employees no longer have to carry cash.

David Cox of DCE Group and a Caxton currency card user explained, “I used to have to take out large sums of cash for our event managers to use as a float. In addition to being an administrative nightmare, it was also unsafe.”

Another Caxton FX customer, Mike Skidmore, Bursar of Wellingborough School stated, “Security is the first and most important benefit of using the Caxton cards. When you accompany this with immediately accessible funds and significantly better exchange rates, we get far more for our money as well as peace of mind.”

Prepaid Currency Cards — the future

Tough economic times have focussed businesses on ways to spend wisely and to reduce unnecessary expenditure. Increased budgeting and charges being implemented by companies such as Ryanair, on traditional methods of payment such as bank credit and debit cards, will lead to rapid growth in numbers of prepaid card customers in 2010 and beyond, with particular growth in the corporate travel market.

James Hickman, managing director at Caxton FX anticipates, “We expect to see several new travel products in the next year, in order to meet this growing demand. Many will not be backed by suitable security processes and customer service. We recommend businesses looking to integrate prepaid currency cards into their expenses system, select an established and credible provider.”